Private Lebel Mini Project

8/3/2019 Private Lebel Mini Project

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Mini project reportOn

Private labels(with special reference to mores pl

AU79)

SUBMITTED TO SUBMITTED BY

Prof. K.Anitha Parth Sarthi

6034

RM


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Private label

INDIAN RETAIL SCENARIO

With more than 12 million retail outlets, India has one of the highest retail densities in theworld. The retail landscape in India is dominated by mom-pop stores and though organized

retail is emerging, it still constitutes a minuscule 3 per cent of overall retail in the country.

But last 45 years has seen many Indian companies making a entry into organized retail, with

a few multinationals entering in the cash-and-carry formats and others tying-up with Indian

companies. Most prominent ones are Reliance, Futures group, Spencers, and A.V. Birla

Group. The BMI India Retail Report for the third-quarter of 2010, forecasts that the total

retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the

expanding middle and upper class consumer base, there will also be opportunities in India's

tier II and III cities. The greater availability of personal credit and a growing vehicle

population to improve mobility also contribute to a trend towards annual retail sales growth

of 11.4 per cent. Mass grocery retail (MGR) sales in India are forecast to undergo enormous

growth over the forecast period. BMI further predicts that sales through MGR outlets will

increase by 154 per cent to reach US$ 15.29 billion by 2014. This is a consequence of India's

dramatic, rapid shift from small independent retailers to large, modern outlets.

China and India are predicted to account for almost 91 per cent of regional retail sales in2010 and by 2014 their share of the regional market is expected to be more than 92 per cent.


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Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual

average of 14 per cent. India should experience the most rapid rate of growth in the region,

followed by China.

For India, its forecast market share of 13.9 per cent in 2010 is expected to increase to 14.3 per

cent by 2014. Established retailers are tapping into the growing retail market by introducing

innovative store formats. Spencer's Retail, More (owned by Aditya Birla Group) and

Shoppers Stop (owned by K Raheja Group) already plan to expand. According to a

McKinsey & Company report titled 'The Great Indian Bazaar: Organized Retail Comes of

Age in India', organized retail in India is expected to increase from 5 per cent of the total

market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by

2015.India continues to be among the most attractive countries for global retailers. Foreign

direct investment (FDI) inflows between April 2000 and April 2010, in single-brand retail

trading, stood at US$ 194.69 million, according to the Department of Industrial Policy and

Promotion (DIPP)

PRIVATE LABELS

Private labels are brands owned, merchandised and sold by retailers themselves. These can

be categorized into store brands, store sub-brands &Umbrella brands. They are also called in-

store or own brands. Private labels are unique to a particular retailer and they can be divided

into a number of categories where the retailers name is evident on packaging. From apparel,

healthcare products and furnishings to consumer items, they are making their presence felt in

a variety of retail items in India. Globally, private labels contribute 17% of retail sales with a

growth of 5% per annum. International retailers like Wal-Mart of USA and Tesco of UK have

40% and 55% own label brands representation in their stores, respectively. Private label

penetration in the United Kingdom is close to 37 per cent currently, and is forecast to exceed

40 per cent by 2011. In Germany private label has shot up from 12 per cent of sales to 34 per

cent over the last decade. And apart from the multi-brand retail stores, a category of retailers

like Ikea, Toys R Us, Zara has also been created who sell only private label brands. Private

labels are getting retailer attention due to profitability promise. Emulating internationalcounterparts, where private label are increasingly gaining significance, most department


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stores, supermarket chains, hypermarket chains and discounters in India are promoting

private label products. The fundamental reason for this is the much higher margin and

profitability on such products, compared with branded alternatives. Indian retailers are

increasingly hoping to ride on the attractive proposition of private label products that promise

higher quality, lower prices and 100 percent availability to consumers and at the same time

offer up to three times higher operating margins to the retailer.

Share in percentage of

total sales

2000 2010

World 14% 17%

U.K 21% 37%

North America 20% 30%

Western Europe 24% 27%

India ------- 3%

China 0.1% 5%

The increase in market share of private label brands has been attributed to growth of

organized retail. In the United States, private label brands account for 20 percent of sales in

super markets and mass merchandisers. The overall share of private label brands as a

percentage of the total consumer packaged goods in North America and Western Europe is

expected to grow from 20 percent in 2000 to almost 30 percent in 2010. For some countries

in Western Europe like United Kingdom, Switzerland, and Germany where organized retail

has consolidated presence, share of private labels is already more than 30 percent and it is

expected to go even higher. Growth of organized retail chain in India has also led to growth

of private label brands in India. Indian economy has seen average growth rate of 6.8 percentsince 1994, putting purchasing power in the hands of customer. Though initial growth of

private label brands in India has been limited to certain categories like grocery and apparel, it

is expected to expand into many other categories as well. The Central Statistical Organization

estimated the economic growth of India for the second quarter of 2010 to be 8.9 percent.

Currently, organized retail in India is estimated to have only 5 percent share. In the total retail

market, it is expected to grow at 25-30 percent. Thus, with the growth of organized retail in

India, the private label brands are also expected to grow as experienced in other developed


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countries. The growth of private label brands in India presents an interesting opportunity for

the retailer to understand the motivations of consumers behind choice of private label brands.

OBJECTIVE OF STUDY:

1. To understand the price differences which exist between the private label and the

manufactured brands.

2. To understand the reasons behind the evolution of the PLs, their status in the Indian retail

industry and to analyze the strategies of retailers in competing with the national brands

3. To analyze the future prospects and challenges of PLs in India with the prospective

changes in the retail industry.

METHODOLOGY: The methodology for the study is primarily qualitative. The

directions for the research have been drawn out from a review of literature and secondary

data of the retailers have been used to gain insights of their strategies and plans for private

labels in their chains. For knowing the categories in which private labels are emerging and

their pricing, we have visited the retailers and observed the private labels on display.

RETAILERS

The Spencers retail is part of the RPG group which is a US$ 3.4 billion business

conglomerate, with diversified interests in technology, entertainment, power, transmission

apart from retail. Spencers is one of the older organized retailers in the country having a

much longer history than most of the other players in the industry. It initially started off as

RPG and introduced the concept of specialty stores like FoodWorld, Health and Glow and

Music World and then took over Spencers. The group has 400 stores across 65 cities

covering a retail trading area of 2 million sq ft. There are five retail formats at Spencers,

with Spencers Express being the smallestaround 1000 sq ft in size and Spencers Hyper

being the largest with more than 25,000 sq ft in trading area. The second retailer who has

been picked for the study is Big Bazaar which is part of the Pantaloon Retail group, which is

a leading retail group in the country having multi-format presence in both the value and

lifestyle segment of the Indian consumer market. Pantloon has presence in over 53 cities with


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its 1000 plus shops, covering more than 7 million sq ft of retail space. Big Bazaar which is

the focus of the study is a Hyper mart format of the group with over 90 outlets across the

country.

Reliance Fresh is the convenience store format which forms part of the retail business of

Reliance Industries of India which is headed by Mukesh Ambani. Reliance plans to invest in

excess of Rs 25000 crores in the next 4 years in their retail division. The company already

has in excess of 560 reliance fresh outlets across the country. These stores sell fresh fruits and

vegetables, staples, groceries, fresh juice bars and dairy products.A typical Reliance Fresh

store is approximately 3000-4000 square feet and caters to a catchment area of 23 km.

Shoppers Stop is an Indian department stores promoted by the K Raheja Corp Group

(Chandru L Raheja Group), started in the year 1991 with its first store in Andheri, Mumbai.

Shoppers Stop is one of the leading retail stores in India. Shoppers Stop began by operating a

chain of department stores under the name Shoppers Stop in India. Shoppers Stop has 35

stores across the country and three stores under the name Home Stop. Shoppers Stop retails a

range of branded apparel and private label under the following categories of apparel,

footwear, fashion jewellery, leather products, accessories and home products. These are

complemented by cafe, food, entertainment, personal care and various beauty related

services. Trent is the retail arm of the Tata group. Started in 1998, Trent operates Westside,one of the many growing retail chains in India. Trent also operates the newly launched

hypermarket, Star Bazaar which is situated in Ahmedabad, Bangalore and Mumbai. It is also

opened Ampa Mall in Chennai. Bharti Retail Ltd. is a wholly owned subsidiary of Bharti

Enterprises. Bharti Retail operates a chain of multiple format stores. The companys

neighbourhood format stores operate under the "Easyday" brand and the compact

hypermarket format under the Easyday market brand. Bharti Enterprises tied-up with Wal-

Mart for opening a chain of retail stores all over India. Though the retail chain store venture

is yet to see the light, the two companies, in August 2007, made a surprise statement that they

have signed a wholesale cash-and-carry deal.

PRIVATE LABEL GROWTH IN INDIA

And now, the role of private labels is gaining significance in the developing markets too. In

India there is a growing trend towards acceptance of private label brands and thus their


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penetration is on the rise especially in the apparel, consumer durables, home care and FMCG

segments. India is still an under-branded country and in each category there is still a lot of

scope for growth, this is where the private label comes in and the story is looking good so far.

For instance, Future Group has already tasted the success with its Tasty Treat brand which is

just behind Frito Lay in the potato chips segment. Its Care Mate in the baby diaper segment

has left behind Huggies in the in-store sales. At Spencers, diapers and agarbattis sell more

than market leaders across the store chain. Experts comment that when it comes to local

tastes and preferences, private label brands have an advantage over national brands and this

reflects in the increasing percentage share of these goods in Indian retail chains.

Retailer Private label Category

RPG Spencers Smart Choice Food & Grocery

Future Group Tasty Treat Food & Grocery

Bharti Retail Easy Day Fruits and vegetables,

groceries and staples,

consumer durables.

Tata- Tesco Star

Bazaar

TESCO daily, Daisy, All about men. Health and beauty,Food

& Grocery.

Shoppers Stop STOP,Kashish,LIFE,Vettorio,Fratin,Eliza

Donatein,Acropolis

Apparels

Reliance Fresh Reliance Select Food and Grocery

Adityaa birla

groups More

AU79 Male grooming.

As the figure shows, among the major Indian players, the degree of private label penetration

is the highest in Trent with 90 per cent, followed by Reliance Retail (80 per cent) &

Pantaloon (75 per cent)


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COMMERCIAL OBJECTIVES BEHIND LAUNCHING PRIVATE LABELS

There are certain objectives that a retailer has in mind before getting into private label goods.Figure 2 lists the benefits that a retailer expects from the in-store brands.


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1. Higher Margins :Private label goods are cheaper to produce than branded goods. Besides,

due to the lack of advertising and marketing expenses they provide double advantage to the

retailer when it comes to the profit margins. While majority of branded goods provide

margins in the range of 6-12%, private label goods can offer margins up to 40% . Not only

they give a higher margin to the retailers, private labels have also changed the balance of

power between brand manufacturers and retailers, giving the latter a decided advantage when

negotiating terms with the brand manufacturers.

2. Stronger Customer Loyalty: As the private label offerings increase and the quality is

assured, a high sense of loyalty is cultivated among its customer base. This customer loyalty

is the result of an affinity with the retailer brand which implies that the development of

private label brands can tangibly enhance the retailers brand itself. So in the long run, the

private labels become an important tool for the retailer to establish its positioning and

strategically attract the target customers to its outlet. Numerous studies have also shown that

private label buyers are more store-loyal and not as easily influenced as brand buyers.

3. Differentiation :Through private labels, retailers get a chance to bring in unique products

in their supply chains that have not been branded before. So if a retailer can cater to the local

tastes and preferences of the consumers well by top quality private labels then they can

differentiate themselves from other stores and become destination stores. In effect, its a win-

win situation even for the producers who get a chance to display their produce.


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4. Freedom with Pricing Strategy :A retailer promoting a private label has the added benefit

of greater freedom to play with pricing strategies, as a result of which these are overall

cheaper than brand leaders. For instance, in USA, some private labels are 25 percent cheaper

than leading brands . In addition, since it is an own private label, the retailer has the freedom

to create its own marketing strategy and have more control over its stock inventory. This

command of all the stages that a product goes through, gives the retailer high flexibility in

pricing.

5. Positioning during economic downturns :The growth of private labels is likely to

continue in the current financial environment as cashstrapped consumers' perception of the

products as a cheaper option changes. The price advantage of private labels leads to the belief

that these score in times of economic meltdown, and further that this newly-acquired market

share is maintained even as the recession swings out. Even after the economy bounces back,

consumers will naturally gravitate towards products marked at lower prices yet offering the

same quality, especially where the retail name is a trusted national or regional player.

PRIVATE LABEL MATURITY CURVE


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and hence, offers a reliable point of difference from other category players. By offering a

differentiated value proposition, a private label utilizes the approach that national brands use

to arrive at a holistic benefit proposition rather than the specific positioning they use. This

furthers its promise that has been already informed by the competition, confirming its

category membership, but is clearly not a me-too expression. It is also successful as it

demonstrates a commitment to offer consumers multiple choices and varieties with distinct

attributes, benefits and price points.

2. Leverage the Consumer Connection A successful private label has the ability to own the

consumer connection and has the capacity to strike a chord with consumers in multiple

categories of products. Unlike national brands, private labels are offered exclusively through

a specific retailer and can easily surpass specific categories because they have a consumer

focus rather than a product focus as their brand foundation. These brands instigate

trustworthiness and allegiance from their loyal consumers that the parent store becomes their

conscious and obvious retail source for certain categories. Moreover, these categories may be

the reason that consumers are initially drawn into the store, but once they get there, the store

also has the prospect of encouraging them to spend more on impulse purchases. Therefore,

the private labels not only reinforce enduring loyalty and positive feelings for the retail brand,

they also enable the retailer to capture a more significant share of the consumers heart,wallet, mind space and lifestyle than a national brand.

3. Communicate at the Point Of Sale :Retailers need to be more cognizant of the

significance of the communication with the consumer at the point of sale. They own the

canvas consumers shop on and thus, through store environments, in-store messaging (like

signage), merchandising systems, and packaging as well as external messaging like circulars,

catalogs and advertising in a congruent manner, the retailer is able to create a lasting

impression in-store, at shelf, at the time of purchase and during usage. Retailers need to make

sure that they send out the right message at these interaction points. Moreover, many of these

messages do not require revolutionary change for extended periods of time, so they

perpetuate a persuasive branded voice and dont require constant investment from the retailer.

4. Collaborative category management :Category management is instrumental for a retailer

to realize its own-brand goals and aspirations. To maximize the efficiencies of product flowthroughout the distribution system, a retailer must be aligned with the supplier. The


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relationship between the retailer and trade should become increasingly about cooperation and

lesser about the retailer negotiating with the manufacturer or supplier on price. By joining

hands, they can strengthen their trade relationships and ensure that the category as a whole

remains profitable and emotionally appealing to the customer resulting in both private label

and branded goods as winners. They can collaborate in understanding and deciding how to

optimize the product lines and Stock Keeping Units (SKUs) that will progress the category

definition as a whole and determine planograms and shelf allocations to rally the greatest

degree of category interest and excitement from consumers. 5. Manage Brand Architecture

the right way Brand architecture is a critical consideration for private label marketing. Once

the brand proposition solidifies, the brand architecture strategy enables decision makers to

promote this promise at the store level in order to stimulate a sense of familiarity, recognition

and trust. Also, private labels have broader set of aisles than national brands. Because of this,

it becomes more and more important to differentiate its attributes and benefits on an aisle,

category and product basis. So the implication for the retailer is to strike the right balance of

similarities and differences with brand messaging and portfolio offerings.

OBSERVATIONS FROM RETAIL STORE SURVEYS

During the course of this project, i visited several such retail outlets and also found some

secondary information from internet. Here is a pen picture of what i found:

1. Store space: Nearly 40-50% of the store space was dedicated to store brands. These

products shared the shelf space with other branded products. For example, in the Reliance

store that we visited, its curd brand Dairy Life was placed next to the other brands, such as

Amul.

2. A number of store brands: This is especially true for apparel. Shoppers Stop has several

in house brands. For example, in the womens wear category itself it has STOP, Kashish,


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Remika etc. Similarly, in the mens wear category, it has STOP, Life, Vettorio Fratini, and so

on. These products are not differentiated from the other brands in terms of store space.

3. Price tag: These products were priced substantially lower than the other brands. For

example, Reliances tea brand sported a price tag of Rs 118 for 500 gms, whereas Brooke

Bond, which was placed just next to it, was available for Rs 132 for 490 gms.

4. Catered to a number of categories: In these stores, the store brands were not limited to a

particular category. For example in Shoppers Stop, it extended from apparel for men, women

and children to crockery, kitchenware, and even furnishings. Similarly, in a Reliance store, it

extended from pulses to spices, noodles and even diary products.

Data interpretation

1. Do you purchase private label brands?

Yes-10 no-0


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Out of 10 people 10 people says that they purchase private labels.

2. Generally in which category you purchase private label brands?

Fmcg-5 grocery-2 consumer durables-1 apparels-2

Out of 10 respondent 50% of them says that they purchase private labels in FMCG

category,20% purchase in grocery,10% in consumer durables and 20% in apparels.

3. Where do you buy the private label brands from?

purchase

yes

no

purchase

FMCG

grocery

consumer durables

Apparels


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Shopping malls-5 speciality store-4 internet-0 others-1

Out of 10 respondents 5 said that they made their purchase in a shopping malls,4 said that

they made their purchase in specialty store, 1 respondent said that they made their purchase in

other places and there is no internet usage for making private label purchase.

4 a. I feel confident when I use PLBs.

Out of 10 respondents 1 respondent was strongly agree with this, 5 respondents was agree,3

was neutral and 1 response for disagree and no response for strongly disagree.

4 b. I find economical to buy PLBs

Out of 10 respondents 1 was strongly agree,7 was agree,2 was neutral and no response for disagree

and strongly disagree.

shopping

shopping malls

speciality store

internet

others

strongly agree

agree

neutral

disagree

strongly disagree


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4 c. PLBs may be associated to luxury

Out of 10 respondents ,1 respondent said that he is strongly agree with this point,2 was agree,4 was

neutral,2 respondent said that they disagree with this and 1 respondent was strongly disagree with

this point.

4 d. I find PLBs good for ones image

Out of 10 respondents 1 was strongly agree with this point,5 was neutral,3 was disagree and 1

respondent was strongly disagree with this point.

strongly agree

agree

neutral

disagree

strongly disagree

strongly agree

agree

neutral

disagree

strongly disagree


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4 e. PLBs have youthful image

Out of 10 respondents ,1 respondent said that he is strongly agree with this point,2 was agree,4 was

neutral,2 respondent said that they disagree with this and 1 respondent was strongly disagree with

this point.

4 f. It is secure to use PLBs

Out of 10 respondents 4 said that they are agree with this point,2 respondent was neutral ,4

respondent was disagree with this point and no response for strongly agree or strongly disagree.

strongly agree

agree

neutral

disagree

strongly disagree

strongly agree

agree

neutral

disagree

strongly disagree


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4 g. I find PLBs simple to purchase

Out of 10 respondent 4 respondent said that PLB is simple to purchase and they strongly agree with

this point,4 respondent was agree and 2 respondent was neutral and there was no response for

disagree or strongly disagree.

4 h.Its reasonable to buy PLBs

Out of 10 respondent 5 respondent strongly agree with this point,2 respondent was agree and 3

were neutral.

strongly agree

agree

neutral

disagree

strongly disagree

strongly agree

agree

neutral

disagree

strongly disagree


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4 i. Warranty is provided with PLBs

Out of 10 respondents 3 respondent was agree,3 was neutral and 4 respondent strongly disagree

with this point.

4 j. I think that PLBs are innovating

Out of 10 respondent 1 respondent was strongly agree,3 was agree,1 was neutral,2 was disagree

and 3 strongly disagree with the point.

strongly agree

2nd Qtr

neutral

disagree

strongly disagree

strongly agree

agree

neutral

disagree

strongly disagree


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4 k. It is convenient to purchase PLBs

Out of 10 respondent 2 respondent strongly agree,7 respondent agree and 1 respondent was neutral

on this point.

strongly agree

2nd Qtr

neutral

disagree

strongly disagree

strongly agree

2nd Qtr

neutral

disagree

strongly disagree


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Appendix

Questionnaire

1. Do you purchase private label brands?

Yes No

2. Generally in which category you purchase private label brands?

FMCG Consumer Durables Apparels

Grocery Other(please specify)_______

3. Where do you buy the private label brands from?

Shopping malls

Speciality stores Internet Others (please specify)_________


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4. Mark the following statements with 1 if you strongly agree to 5 if you strongly disagree

Statements Strongly

Agree

1

Agree

2

Neutral

3

Disagree

4

Strongly

Disagree

5

I feel confident when I use PLBs

I find economical to buy PLBs

PLBs may be associated to luxury

I find PLBs good for ones image

PLBs have youthful image

It is securing to use PLBs

I find PLBs simple to purchase

Its reasonable to buy PLBs

Warranty is provided with PLBs

I think that PLBs are innovating

It is convenient to purchase PLBs


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Area of Residence:___________________ Sex___________________

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Private Lebel Mini Project